Overtime and Bonuses – Know the Difference
QuickBooks packages streamline your accounting processes, including tax, PAYE, UIF, and overtime or bonus pay.
In fact, it’s never too early to start thinking about how you might reward hardworking employees with overtime or bonuses. As a business owner, it’s important to know the difference between the two, so that when the time comes, you’ll be able to do your books correctly.
Hard Work that Pays
Staff who work overtime are legally required to be financially compensated at 1.5 times their hourly rate. This excludes Sundays, when employees should be paid double their rate. Alternatively, they can receive a combination of additional pay and time off.
There are a few exceptions to this rule:
- Senior management workers
- Independent sales staff who stipulate their own working hours
- Part-time employees who work under 24 hours a month
- Emergency workers
In order for overtime to be applicable, it must be approved by management and not exceed 10 hours a week or 12 hours a day.
The amount earned in overtime must be visible on the employee’s pay slip. To work out the tax, you need to take into account the regular amount earned, plus the overtime balance. And, if the total falls under the regular tax bracket, you must apply deductions as you usually would.
It’s important to know that the overtime amount can push the total into a higher tax bracket, meaning bigger subtractions.
Incentives and Extras
This is where the main difference between overtime and bonuses comes in. The payment of bonuses to employees are completely at the discretion of the employer and aren’t required by law.
Very often we hear of ‘13th cheques’, which are an additional monthly salary in December. However, not all businesses are in the financial position to offer 13th cheques. Employers need to tell employees whether they pay 13th cheques, as many people do expect and rely on the extra income.
If you’re looking to reward your employees, there are alternatives to the 13th cheque:
- Production and performance – Employees or departments are given a set of objectives or targets to meet within a deadline. If they meet their deadline, they can be financially rewarded either individually or as a team
- Leave days – In some instances, employers give out one or two extra days leave as a bonus to employees. Employees appreciate this because they not only receive time off, but are also still compensated for it
Regular tax deductions, as with overtime, must be applied to any monetary bonuses.
Your Digital Helper
Whether you’re running QuickBooks Desktop, Online, or Payroll, you’ll find that our customisable templates are ideal to make quick calculations and tax payments. Organised employee lists and ready-to-go payslips streamline the process of allocating and applying relative tax deductions to bonuses or overtime pay.